When Fredericton, a small city in Canada's eastern province of New Brunswick, announced last year that it was going to offer city-wide free Wi-Fi Internet access, some observers and prospective users didn't really get it.

"We had quite a difficult time at the outset explaining the kind of free we meant, that this was the old fashioned kind, meaning no cost, nothing," says Don Fitzgerald, executive director of Team Fredericton, the city's economic development office.

"This is not just a taste test," adds Maurice Gallant, manager of information and communications technology for Fredericton and president and CEO of e-Novations, a city-owned telecom services company.

What he means is, the Wi-Fi service will always be free.

Fredericton (population: 80,000) is a regional center for knowledge-based industries, with about 70 percent of the province's high-tech economic activity concentrated in the city, Fitzgerald explains.

It is home to several entrepreneurial engineering and new media companies as well as the Atlantic region headquarters of CGI Group, a global IT outsourcing company.

"Knowledge-based enterprises consume connectivity," Fitzgerald points out. "Our council recognized this and wanted to foster that kind of economic activity."

So at the urging of Fitzgerald and Gallant, the council committed over $300,000 to build Fred-eZone a Wi-Fi hotzone that will, by the end of this summer, cover most of the business corridor, city facilities -- library, city hall, etc. -- public green spaces, and meeting places, including hotels and conference facilities, across the city.

e-Novations has already deployed 60 Cisco 802.11g access points. Cisco is a major partner and sponsor of the initiative. The access points are placed on a variety of structures, mostly city owned, including water towers, roof tops, traffic signal poles, and inside city and private buildings.

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The network footprint so far encompasses about 30 percent of the area the city envisions eventually covering. It will deploy another 60 to 90 access points before the end of the summer, which will mark the end of the project's first phase.

Fitzgerald and Gallant stress that this is not just a one-shot deal. The city is committed to maintaining and extending the network and upgrading capacity as needed. When it announced a new industrial park recently the city said it would extend Fred-eZone to cover it.

"We want to provide leading-edge connectivity as a basic part of the municipal infrastructure," Gallant says. "From our perspective," Fitzgerald adds, "this is just the same as sidewalks."

The city hopes Fred-eZone will help attract new businesses. Team Fredericton is already in discussions with one U.S. enterprise about establishing a local presence. The Boston-based company develops Wi-Fi applications and sees the city as "a very interesting laboratory."

The company may not come to Fredericton in the end, Fitzgerald says. "But Without Fred-eZone, we wouldn't even be having the conversation."

"There are two economic development benefits we see," Fitzgerald says. "Attraction of new business and growth and retention of existing business. Frankly, I think it's strongest on retention. Once companies get addicted to [having public Wi-Fi access], they won't want to go somewhere where it isn't available."

Fred-eZone is part of a larger strategy. Five years ago when Fredericton was looking for ways to reduce its own internal telecommunications costs, it came up with a strategy that involved building its own fiber backbone network and covering some of the costs by offering spare capacity to other organizations and businesses in the city.

The city formed e-Novations and funded it with a $45,000 loan, which the company paid back earlier this year. E-Novations has built over 15 miles of fiber -- an asset the company values today at about $175,000. The fiber ring links 15 buildings directly. Another 40 are connected to the backbone by point-to-point wireless links built using Canopy technology from Motorola .

E-Novations also uses the Canopy infrastructure to offer high-speed Internet access services to small businesses through ISP partners BrunNet and Eastern Wireless. The Canopy network covers about 98 percent of the community.

The city offers a range of managed network and dark fiber services in competition with Aliant, the incumbent telco in Atlantic Canada. While it's intended to be a not-for-profit corporation, it is running a surplus right now, Fitzgerald says.